Governance Risk & Compliance – SOX regulations

April 2, 2015

In the wake of the financial collapse in 2008 there have been many new regulations introduced that European businesses need to deal with. But how can these new compliance issues be adequately handled without a mountain of extra work?

One of the key factors behind the financial storm that has engulfed Europe in recent years was the lack of requirements for banks and other businesses to hold adequate capital. Financial risk is something all businesses tend to carry and needs to be offset by a certain amount of capital reserves, as we mentioned in our previous blog: ‘How to reduce risk in your finance department, in spite of pressure.’

As such the EU has introduced a number of directives aimed at tightening capital reserve ratios, primarily for banks (under Basel II and III) and insurers (under Solvency II), but also applies to most European businesses either by proxy or by local governance and compliance regulation similar to the Sarbanes-Oxley Act in the USA.

What these new regulations mean for businesses

This new swathe of regulation is primarily focused on ensuring that companies carry enough capital to outweigh their financial risks. Regulations, such as those listed above, aim to enforce this capital reserve requirement both through formal measures, such as imposed ratio limits, and informal measures, such as increased transparency and reporting standards.

Businesses must, therefore, be more careful with their financial risks – using only compliant banks and insurers whilst ensuring their own exposure to risk is clear and well-managed. They must also, perhaps more importantly, submit more thorough and detailed financial reports.

How to ensure compliance

One upshot of the new regulations will be increased audit scrutiny. As such, it is essential that finance departments are confident in the accuracy of their books. Having confidence in the accuracy of your account data will also help your business mitigate risk by clearly identifying current capital reserves as well as exposure to any underlying risks.

Businesses will also need to assess exactly what international regulations they are subject to and ensure that they are picking out the key pieces of account information needed to file the appropriate reports.

For companies listed on various stock exchanges these regulations will be even stricter and the penalties for non-compliance even more severe. So it is essential that both the finance department and top management are aware of all applicable regulation and compliance issues.

How can Adra ACCOUNTS help with compliance?

All this extra reporting, auditing and capital reserve requirements may be a great thing – but where will businesses find the time to ensure 100% accurate accounting and enhanced reporting?

Well, the benefit of using automated data matching and account reconciliation software, such as Adra, is that finance departments can both free up a huge amount of time and ensure accuracy all in one go.

Automatically matching your accounts removes a primary source of account mistakes: human error. Accounts are automatically matched in a matter of minutes rather than hours or days, with advanced logic programming helping you to simply reconcile mismatched accounts.

While providing a rock-solid audit trail, this process also frees up a huge amount of time – time that you can dedicate to seeking out and understanding new international regulations and to delivering clear and compliant financial reports.

If you would like to see the Adra ACCOUNTS software in action then please book yourself a free online demonstration or get in touch with one of our friendly representatives today.